The expressions “Purchase Option” “Lease
Option,” and “Sandwich Option” are
set to become familiar to investors, landlords and potential
home-owners as the global credit crisis continues. Options
are versatile and powerful legal instruments which are
changing the way residential property is bought, held
and sold in the UK.
simply, Options are written agreements that give the
holder choice or freedom. Depending on the wording in
the document, the Owner gives exclusive freedom to buy,
use or sell the Property, or a combination of these
freedoms. If the Buyer chooses to buy whilst the Option
is in place, the Seller must sell. That is the essence
of an Option.
are six essential ingredients of Option Agreements:
a willing seller;
• a written document;
• a specified period of time;
• an option fee;
• a purchase price; and
• a willing buyer.
started with Lease Options
Options fall broadly into three categories;
• A Purchase Option is often short-term and grants
the holder the freedom to buy the property at an agreed
price within a specified period of time.
A Lease Option is a Purchase Option with the added freedom
to lease or use the property in the meantime
A property owner may grant a Lease Option to a tenant
buyer, (a tenant who also has an Option to Buy) allowing
them time to save a deposit, arrange finance, add value
or wait for the property to appreciate. The tenant buyer
can choose the best time to “exercise the option”.
Serving notice in this way obligates him to complete
the purchase, usually with a traditional mortgage. This
is known as ‘Rent to Own’.
A Double Lease Option (Sandwich Option) amounts to two
Lease Option agreements running at the same time. The
property owner grants an investor a Lease Option and
the investor grants a second Option to a tenant buyer.
This effectively means the investor can control property
and even sell it without owning it.
started with Lease Options
Options in Control
of increasing his or her personal debt and liability,
option holders who take control of property before it
is bought will simply make a regular payment to the
Seller or pay the Mortgagees direct on the Owner’s
behalf, effectively assuming the existing finance.
can have the satisfaction of helping those in need;
either those who need to be free of a property which
has now become a liability due to relocation, relationship
breakdown and other pressing reasons; or those who are
forced to make new housing arrangements because they
cannot maintain mortgage repayments themselves.
are not without risk – but the risk is generally
limited to the option fee paid and any costs incurred
during the option period. In many cases Options can
create cash-flow, since the monthly payments to the
Seller or the Mortgagee are usually lower than payments
taken as rent. If property prices increase, the Option
Holder stands to benefit.
started with Lease Options
Options in Practice
agreements can provide relief for homeowners in many
situations. Take Ms D and her partner. They own a two-bed
semi with a conservatory and well kept gardens in a
good part of County Durham but had moved 40 miles away
to settle in a rural location. They were unable to sell
the house. Concerned about vandals and burglars their
quality of life was suffering. Unwilling to become landlords,
they were paying £490 a month for an empty house.
Rather than allowing the situation to spiral out of
control, they granted a 48 month Lease Option with the
purchase price set at £97,000; less than the marketed
sale price. The option holder contributes £300
a month, which covers the interest on the mortgage.
There is an excellent tenant caring for the property.
The investor benefits from £120 profit a month.
option holder intends to add the property to his portfolio
when the market recovers. If it does not he can negotiate
an extension with the owner, or simply allow the option
to lapse or expire. In the case of non-extension the
property will be returned to the Owner in excellent
condition. The investor will have benefitted from the
cashflow but will sacrifice the cost of the option plus
any expenses incurred. If the market moves up, he will
be able to buy an outstanding property at a considerable
looking to exit the market can lease option their property
to another investor, effectively attaining instant relief
and freedom from an investment which was draining them.
to own goes a step further. It is a simple arrangement
allowing a tenant to live in the property, paying rent
in the usual way. The main difference is that the tenant
has a legal document giving him, or her, the right to
buy the house within an agreed time period at a set
price. Tenant Buyers tend to be people who can’t
get a mortgage immediately, or don’t yet have
the needed deposit, but have a strong prospect of securing
finance in the future. The money paid when they move
in, together with the monthly instalments, goes towards
creating a sizeable deposit.
you own an investment property which owes you £100,000
and the value now is closer to £85,000. With an
option you can set the future purchase price (to be
paid within, say, 36 months) at £100,000. When
your tenant buyer moves in you collect an Option Fee
of 3-5 per cent of the agreed purchase price; collect
market rent and monthly instalments of up to 20 per
cent of the rent. When the Tenant Buyer decides to exercise
her Option and buy, the Option Fee and monthly instalments
become the purchase deposit.
to a tenant-buyer in this way has many benefits, not
least of which is the Option Fee paid when the tenant-buyer
moves in and the ongoing rental and instalments. Late
payments and void periods are extremely rare.
responsibility for day to day maintenance and improving
the property lies with the future buyer who takes pride
in his home and can add value to it. This home-owner
mindset safeguards the investor’s cash-flow and
frees him to focus on other aspects of his business.
Giving back to the community by helping local families
own good homes is rewarding.
Agreements are changing the way many are buying and
selling property in the UK. They can be used to control
a substantial portfolio without the need for personal
mortgage debt or liability. Hard pressed landlords can
re-organise their finances and transform portfolios.
Through Rent to Own, Property Options are opening doors
for potential home-owners when finance is not readily
short, these simple yet powerful strategies may well
be an option you can’t refuse.
is an online learning resource centre for landlords
and investors who wish explore the possibilities offered
by property options. To contact Mark Jackson, email
started with Lease Options
you need a Property Options business blueprint which
you can self-implement immediately?
Day Property Options Workshop
April 10, 2010
8:30 AM - 5:30 PM
West Drayton, Greater London UB7 9NA
will come out of this jam-packed workshop with:
confidence to use the tools to go out and create win-win
deals Today..Yes, Really!
Linguistic techniques that will build instant trust
and rapport with vendors and tenant buyers alike!
is just a small sample of what else you will learn:
Property Options – Learn the essential elements
needed to make up an Option
*Practical application of Option strategies.
*Examine real life case studies of how Options have
worked in many different scenarios
*Understand how to effectively “Joint Venture
with Time” and turn a toxic asset into a healthy
*Acquire the secrets of "Moth Attractor Marketing"
*Finding motivated sellers – secrets revealed
*Understand the specific types of vendors that are
ideal for option deals
*How to build rapport through telephone calls, and
develop trust before you even meet the vendor
*Find out how to explain options effectively
*Discover a step by step approach to finding tenant-buyers
*Putting it together – to benefit everyone
*Get the legal bits – the fun part of the seminar!!!
the course of the day, you will learn exactly what you
need to do, step-by-step, to go out and start finding
your own Option Deals using Little or No money of your